JGBs Suffer Worst 4 Days In 10 Years As Nikkei Tops 15,000 First Time Since Jan 2008

The Nikkei 225 just passed 15,000 for the first time since January 2008 no up over 77% from its November 2012 lows. Even "Mr Yen" is worried...

*SAKAKIBARA SAYS MOVEMENT OF EQUITY PRICES `SOMEWHAT BUBBLY'

But the real story is in bond land. Twice last night Japanese bond futures were saved miraculously from a third day in a row and at the open this evening JGB futures are looking set for another test of the limit down (though being saved for now) - as 10Y yields spike above 90bps (+5.5bps on the day), the highest in 13 months; and 5Y yields jump another 5bps to 45bps - the highest in 22 months. The last 4 days in 5Y JGBs has been the worst in 5 years (since June 2008) and 10Y JGB's worst 4-days in 10 years (since August 2003). USDJPY is holding below 102.00 as it seems for now the JGB weakness is soaking up the inflation threat (as we discussed here). Amid all of this turmoil, JGB implied volatility is collapsing to 4 month lows - which smells a lot like hedges being lifted along with underlying risk unwinds.

No Bubbles here...

Remember, nothing goes up forever (and equities are NOT a good inflation hedge away from the normal)...

What us worry? The cost of energy for the Japanese is bumping up against economy-limiting levels once again as they crush the JPY...

JGB Futures have not been happy but are being 'saved' from another halt for now... even as the cash underlying is ugly

This is what is going on in JGBs... JGBs were able to rally since smart money was hedging significantly (and not selling) but once the initial clusterfuck exploded after the BoJ meeting (and protection costs soared), it seems clear that JGBs just became far too expensive to hold given their risk and so protection was unwound and positions were reduced... which is why we are now seeing JGB yields jumping...

5Y JGB biggest 4-day loss in 5 years

10Y JGB biggest 4-day loss in 10 years

and for all those guffawing at the fact that rates are still so low... remember the surging cost of debt that will impact the Japanese economy each time they roll the quadrillion Yen debt load...

Joseph Weisenthal tweeted in regards to this post from Tyler. If you don't know him, he is the executive editor of Business Insider. His response to this JGB story was, and I quote, "LOL."

So there you go...straight from the inside view of business...the "turning" of a 25 year bond run for the nation whose debt/GDP ratio is second to none...gets laughter from that particular shill outlet.

Just passing this along to the faithful, and wishing Kyle Bass well. Passing it along, as I follow this tool on twitter...and it is painful...so do me a favor and take some of that pain off of my shoulders.

"Neoclassical growth theories normally do not distinguish the overall population from the working-age population for reasons of analytical simplicity. However, without taking into account the distinction between the two variables explicitly, the very challenges that Japan is currently faced with will be outside the scope of analysis." - Masaaki Shirakawa, former governor of the Bank of Japan.

No new babies, Japan needs to export its way to growth to compensate for an accelarated aging population. Thus crush the yen. The wider consequence is the aging baby boomer population in advanced economies (huge demographic bulge), and the need for nation states to export their way to growth, all at once, because of this demographic shift. Not an ideal condition for global harmony.

when we need more consumers in the US to keep the "growth" Ponzi going we just let the Mexicans flood in and piss in our gene pool. the fact that countries always need to grow their population through immigration of braun untermensch is some champaign socialist's delusion.

When that negative feedback loop starts to form between USDJPY and JGB is when the samurais get ready to commit seppuku.

Had outright short oats cost me a litttle when the oats exploded a while back... Don't understand that pop still but I suspect Japanese money was involved. Always thought that short cac40 was the way to go since theyFrench can't print as freely as the BOJ

I believe this is just the beginning... JGB's are so frontloaded and top heay it would be like Acapulco cliff dive... When it really starts to go parabolic the only question is how fast before it becomes worldwide headlines and mass panic. The fear will feed on itself and the BOJ will be the only buyer left in the market at that time. This shit is going to get very real

I want to ask some things about this article that may seem like I'm nitpicking. I can assure you I'm not. I have a lack of knowledge or understanding about something that I am curious about.

1) "Twice last night Japanese bond futures were saved miraculously from a third day in a row..."

Is there a typo in there? As in some word(s) left out?

2) What exactly does "saved" mean in this article? Are they just not halting the trading? How is that "saving" the JGB futures at the blue pointed arrows and only where there are blue arrows? It seems to me that if they are just not stoppping the trading, then you could put a blue arrow on any pixel in the chart and say that JGB futures were "saved", at any point on the chart since the last time they halted trading. I am lost at how JGB's were saved at only the blue arrow points. I need some information on just what occured at the blue arrows points. Could you give me a description of what someone, some people, they(?), are doing to "save" the JGB futures market? Just ignorant and curious here.

This might not answer your question, but "halts" occur all the time in Japan. It is built into the system. It is, however, rare for JGBs to be halted due to downside moves, as they have largely been a one way bet since 1990. When the Nikkei began to tumble in 1990, there were days when there might be a half dozen or more trading halts in a session. On any given day, one can probably find numerous single name equities that are halted due to an order imbalance or a gap price move that touches the allowable short term limit. The halts are automatic, programmed into the machines. There is no person or group who decides to call a halt.

Since they are deliberately crushing their currency, it's a good thing that they didn't recently have a big nuclear plant meltdown. Imagine how much more oil would cost if they had a big increase in the need for oil and a depreciating currency with which to buy it. But then again these are problems for the little sheeple that don't fit neatly into the economic models of the Ministry of Central Banking and Magic, so who would care anyway.

Yield still too low... damn halts... if there were really a free market, the rates on Japanese bonds, most European bonds and American bonds would go sky fucking high in a single day, bankrupting them all immediately, leading to worldwide riots and probably civil wars between the statists and their leeches and the people who want to be left the fuck alone.

I believe 2.25% yield curve upshift (vs October as base) is the zero point, that is, when total interest expenses equal total Japanese Government revenues, leaving debt default or yen default as the only options. There's still a way to go, but the aging population kicker (account drawdowns) exacerbates the problem. Also, with a declining population, and with earthquakes/tsunamis still fresh in everyone's mind, a weaker yen isn't going to entice foreign investment. Japan has no choice but to go it alone.

Much of this Abenomics stuff was a last ditch effort to save certain Japanese corporates. 77 yen was going to be the death knell of Sharp, Toshiba, NEC, Casio and maybe Sony. They are trying to buy time, but they seem to forget the world is not static. South Korea and Thailand cut rates to address Abenomics. Singapore and Malaysia are going to get hit, too. Singapore RE is a little fluffy.

I don't know whose century this is going to be, but increasingly it does not look like it will be the Pacific Century so many had taken for granted.

I concur. What was a slow motion train wreck is now on 16x fast forward with this Abenomics silliness. They have no choice, as you've stated, as they realized that Japan will sink down to be a second tiered nation in a few decade. This is the kamakazi gamble to try to do the impossible.